Annual General Meeting Special: Post-Macondo efforts extensive, ongoing

IADC continues collaboration with industry groups, regulators and governments around the world to build a better industry

Over the past year, IADC continued to work with the US Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE), recently replaced by the Bureau of Safety and Environmental Enforcement (BSEE), as well as other regulatory and industry groups from the US and around the world, to get the global drilling industry back on track in Macondo’s aftermath. The association recognized that, going forward, nurturing the relationships we forged during 2010 with these government and industry organizations will be critical to our members’ success in this interdependent world.

“The opportunity exists for all stakeholders to continue to grow that relationship into a collaborative enterprise in a non-crisis situation. Working together, we can build a better industry with greater responsibility,” IADC president Dr Lee Hunt wrote in the September/October 2011 issue of Drilling Contractor.

Also at the forefront this year was ensuring that the voice of our industry is heard and that regulations developed in reaction to Macondo reflect our industry’s true safety records.

With BOEMRE, IADC’s efforts ran the gamut from crusading for an end to the drilling moratorium and for expediting the slow pace of drilling permit approvals, to ironing out ambiguous and inconsistent offshore drilling requirements, to responding to the first of many regulatory proposals.

Testimony in support of the industry was provided before multiple groups, such as congressional committees, the US Chemical Safety Board and the National Academy of Engineering, and motions against lawsuits brought by environmentalists continued to be fought in the legal arena.

With industry groups such as API and the International Association of Oil and Gas Producers (OGP), collaborations were undertaken to assure governments and regulators that the industry can carry out offshore drilling in a safe manner. IADC is actively participating, for example, on OGP’s Wells Expert Committee, established as a result of the Global Industry Response Group (GIRG) initiative.

In recent months, IADC also has been actively engaged with the Offshore Operators Committee’s (OOC) SEMS Task Force, a collaboration that resulted in a toolkit to help operators and their drilling contractors comply with BSEE’s requirements for mandatory safety and environmental management systems.

The following is a summary of these Macondo-related activities and more over the past year. Efforts are extensive, and most are ongoing.

BOEMRE/BSEE/BOEM

Although US Interior Secretary Ken Salazar officially lifted the drilling moratorium in October 2010, for months it seemed as if a “permitorium” had taken its place. A study undertaken in late 2010 by industry groups, including IADC member companies, found that staffing constraints at BOEMRE were curtailing drilling permit approvals.

At the same time, a lack of clarity concerning new requirements led to further delays.

Late last year, as part of formal comments filed to BOEMRE on the interim final rule on offshore drilling safety, IADC and other industry groups urged the agency to open its regulatory process to the public and reiterated an invitation to participate in API’s open standards-setting process. The comment emphasized that notice and comment rulemaking would help make the agency’s rulemaking more efficient and likely achieve a safety benefit. It also would assist BOEMRE in promulgating more legally defensible regulatory actions.

Further, the agency was urged to issue a final rule to reverse its decision to interpret “should” as “must” with regards to more than 14,000 discretionary, non-mandatory provisions in 80 API standards. There is no regulatory basis for adopting a blanket requirement for all discretionary language to become mandatory, the trade groups pointed out. Further, mandatory compliance with discretionary API standards provisions is impossible in many cases.

To highlight this issue, industry groups provided detailed commentary on key standards – Spec 6A, RP 65-2, RP 53, MPMS Chapter 7, 20.1 and 21.1. These documents represent an important subset of the referenced standards and include valves, blowout preventers, cementing practices and measurement techniques. The commentary pointed out how conflicts would arise if “must” were substituted for “should.”

The document submitted to BOEMRE also highlighted nearly 30 additional technical issues raised by the agency’s interim final rule and urged the regulators to publish a final rule responding to these concerns.

Lease prospects

In December 2010, Secretary Salazar announced that areas in the eastern Gulf of Mexico (GOM) – areas under a congressional moratorium – as well as the mid- and south Atlantic planning areas were no longer under consideration for potential development through 2017. The explanation provided was that critical BOEMRE resources must be devoted to planning areas that already had leases for future development.

Industry groups, including IADC, soon sent a letter to the chairmen and ranking members of the House and Senate Appropriations committees asking Congress to provide additional resources to BOEMRE to increase staff, training and inspectors.

“It is imperative that BOEMRE is provided the necessary resources to review and process permits to drill OCS waters, and to maintain a vibrant leasing program in the OCS,” the groups stated.

It was also pointed out that the former Minerals Management Service (MMS) collected more than $22 billion in revenue from the oil and gas industry in 2008, a portion of which could go toward increasing staff and funding at BOEMRE.

Later in the year, IADC joined other organizations in filing comments urging the US government to reconsider its decision to exclude those areas from the Programmatic Environmental Impact Statement (PEIS) for the 2012-2017 OCS Leasing Plan, as well as from the 2012-2017 leasing program itself.

It was pointed out that keeping these areas out of the PEIS would keep them off-limits to potential development until at least 2017. This is a shortsighted move considering the increasing demand for energy in the US. Including these areas in the PEIS does not guarantee their inclusion in the final leasing program. However, an area must be analyzed pursuant to the National Environmental Policy Act (NEPA) in order to be included in a five-year program.

Industry also urged BOEMRE and other agencies to ensure understanding of their roles in the Multi-Sale Environmental Impact Statement (EIS) addressing Central and Western GOM lease sales for the 2012-2017 leasing program. On 1 October 2011, the leasing responsibilities of BOEMRE were assigned to the newly formed Bureau of Ocean Energy Management (BOEM).

BOEMRE jurisdiction over contractors

In the media as well, IADC worked to ensure that industry’s position was represented. In July 2011, IADC executive VP – government affairs Brian Petty commented in a Dow Jones newswire article that BOEMRE “doesn’t have the experience or resources to regulate this whole arena of contractors. At the end of the day, it’s up to the operator to inspect any flaw or episode.”

The comment was made in response to then-BOEMRE director Michael Bromwich saying that the agency will pursue fines, penalties or charges against drilling contractors and service providers where actions of the companies are “egregious.” Mr Petty noted that the bureau’s actions would create confusion in determining liability for drilling projects. It could also make it difficult for contractors to get insurance and, as a result, push them toward doing more business in foreign waters.

In an October 2011 Dow Jones article, Mr Petty again spoke on behalf of the industry to assert that fining contractors who worked for BP on the Macondo well lacks precedent and may be illegal.

By pursuing contractors, regulators “give a green light for others to go after them – on the same basis and on the same level” as primary operators, he said. Decades of precedent support the idea that only operators should be targeted for rule violations, he emphasized.

The comment was given as US regulators were looking to hand out punishments for contractors’ roles in the Macondo spill. Mr Bromwich said contractors should be held accountable and said fines were coming in the “very near future.”

The Outer Continental Shelf Lands Act allows the government to collect $40,000 per day per violation.

Sen. David Vitter, R-La., supported drilling contractors’ position and questioned the legal basis for fines. “There needs to be a full accounting of the legal analysis behind (the Department of) Interior’s expansion of authority,” Sen. Vitter said.

On 12 October 2011, BSEE notified Transocean and Halliburton of the initiation of civil penalty proceedings against their companies.

BOEMRE restructuring

In October 2011, BOEMRE split into two independent bureaus – the Bureau of Ocean Energy Management (BOEM) and the Bureau of Safety and Environmental Enforcement (BSEE).

The BOEM’s programs include offshore leasing, resource evaluation, review and administration of oil and gas exploration and development plans, NEPA analysis and environmental studies. Tommy P Beaudreau, previously BOEMRE senior adviser, leads this newly formed agency, while Mr Bromwich is temporarily leading the BSEE, whose functions include the development and enforcement of safety and environmental regulations, inspections, offshore regulatory programs, spill response, and training and environmental compliance programs.

Ocean Energy Safety Advisory Committee

Don Jacobsen of Noble Drilling Serviceswas among industry personnel selected to be part of a 15-member Ocean Energy Safety Advisory Committee. The group provides the US Interior Department and BOEMRE with guidance on improving offshore drilling safety, well containment and spill response.

In addition to Mr Jacobsen, other offshore industry personnel appointed to the committee are Charlie Williams, Well Engineering and Production Technology, Shell; Paul Siegele, Chevron’s Energy Technology Company; and Joseph Gebara, Technip USA. Former Sandia National Laboratory director Tom Hunter leads the body as chairman.

National Commission

Through late 2010 and into this year, IADC continued to liaise with the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling.

Mr Petty met with staff members of the presidential commission ahead of a formal hearing, providing the commission with various documents, including IADC’s safety case template. Previous congressional testimony by IADC on international regulatory systems and the safety case also was provided.

In answer to commission questions on a “check list” for critical systems in deepwater drilling, Mr Petty provided information on IADC’s efforts with API through the Joint Industry Task Force (JITF) and the recommendations that were developed for Secretary Salazar.

Commission staffers were also advised that BOEMRE should be left to devise a post-Macondo regulatory system without congressional-specific direction, and OSHA should not be involved in inspecting offshore facilities.

Mr Petty, along with IADC group VP – operations & accreditation Steve Kropla and Van Scoyoc Associates’ Jan Schoonmaker, also met with commission staff to discuss considerations associated with implementing a safety case system in the US. Other items of discussion included a possible role for IADC in training new BOEMRE inspectors, real-time monitoring and development of leading indicators for industry safety performance.

Congressional action

In late 2010, IADC and industry groups fought against language in a House bill that would have extended offshore permit reviews from 30 days to 90 days. A joint letter was sent to the chairmen and ranking members of the Senate Committee on Appropriations and the Subcommittee on Interior, Environment and Related Agencies in December.

The justification provided for the extension was that additional environmental reviews were needed. Industry pointed out that this claim ignores the significant amount of review required under the current regulatory regime for offshore development.

It was also misleading to claim that BOEMRE has only 30 days to review an exploration plan. The 30-day clock begins only after the agency deems the exploration plan complete; moreover, it has 15 more days before this timeline begins to decide whether to ask for additional information. If gaps are identified, additional information can be requested before the proposal is finalized.

“This proposal to extend the exploration plan review period would only serve to exacerbate the confusion – jeopardizing jobs across the region and threatening to send much needed investment capital overseas,” the letter said.

API

API Standard 65-2 (“Isolating Potential Flow Zones During Well Construction”) was issued in December 2010, and API RP 96 (“Deepwater Well Design Considerations”) was balloted in mid-2011 and is being revised in consideration of comments received.

API Standard 53 (“Blowout Prevention Equipment Systems for Drilling Operations”) will be changed from a recommended practice to a standard because BSEE is expected to incorporate the standard into new regulations. “It’s a substantial rewrite of the old RP 53 with a lot of added meat,” said Alan Spackman, IADC vice president – offshore technical and regulatory affairs.

Additionally, API and IADC will be jointly issuing Bulletin 97, primarily an interface document between the drilling contractor and lease operator. It too is being revised in consideration of comments received. The document has been tailored for US-specific concerns, and further work would be needed to adapt it for use in other regions. “We’re happy to help anyone in an operating region if you need to develop national guidance,” Mr Spackman said.

SEMS compliance

IADC collaborated with the OOC’s SEMS Task Force to produce a collection of tools to help contractor companies prepare for safety and environmental management systems (SEMS) implementation. Lease holders and operators on the US Outer Continental Shelf are under a 15 November deadline to develop and implement a SEMS program. IADC and the Center for Offshore Safety worked with the task force to develop a toolkit for drilling contractors and operators. It includes:

• An audit checklist;

• Matrices of regulatory mandated training for drilling/marine/production;

• Knowledge and skills documentation worksheet;

• Operator-contractor agreement letter templates;

• Terms/definitions – clarification document; and

• Compliance readiness worksheet.

These tools present the collective views of industry professionals who reviewed the SEMS rule and identified where the regulation points to the contractor as needing to take specific actions and supply documents or records of those actions to the lessee in support of the lessee’s SEMS.

These tools also can be used by lessees who do not have SEMS in place as they work to develop their SEMS.

“These tools provide guidance for contractors in reviewing their company’s internal safety and environmental management policies, procedures, operations and personnel to help ensure the company’s readiness to meet SEMS requirements and the expectations of their lessee’s SEMS plan,” said Brenda Kelly, IADC senior director – accreditation and certification and chair of the OOC SEMS Competence Subcommittee.

The toolkit is available on the IADC website.

In a related matter, IADC’s offshore operations is developing comments in response to BSEE’s proposed additions to its SEMS regulations. The additional proposed provisions would address: stop work authority, employee participation in SEMS development, designation of an ultimate work authority, reporting of unsafe working conditions, job safety analyses and independent third-party audits. According to Mr Spackman, the proposal is a further confusion regarding operator/contractor responsibilities under BSEE regulations and creates Swiss cheese-like holes in the SEMS by carving out issues based on jurisdictional boundaries that were agreed between MMS and the Coast Guard.

OGP Wells expert committee

IADC is providing member and staff support to two task forces on the OGP Wells Expert Committee (WEC), formed in 2011 as a result of the GIRG initiative. The aim is to provide recommendations on industrywide improvements in the wake of Macondo and Australia’s Montara spill.

Jean-Paul Buisine, Transocean, and Peter Dansen, Maersk Drilling, are members of the BOP Reliability and Technology Development task force, chaired by Steve Haden, BP, with Mr Buisine as co-chair. IADC’s Mr Kropla is co-chair of the Human Factors – Training, Competency and Behaviours subgroup, chaired by Gareth Williams, BG Group. Mr Kropla is also a member of the BOP subgroup.

In addition, Allan McColl, Maersk Drilling, and Michael Fry, Transocean, participated in the July WEC meeting in London.

Other WEC groups include a Database task force designed to collect industrywide information on well control incidents and an International Standards task force responsible for identifying and prioritizing relevant API, ISO and other industry standards. The overall WEC effort is chaired by Steve Cromar, ConocoPhillips.

The WEC held its inaugural meeting in London in June 2011, with follow-up meetings in August in Houston and in September and October in London. Subsequent monthly meetings are planned for the remainder of 2011.

OGP Safety Committee Workshop

In April 2011, Mr Spackman was among speakers from BP, Statoil and others at the OGP Safety Committee Workshop in Kuala Lumpur, Malaysia. He provided an overview of the IADC HSE Case Guidelines, including recent updates, and urged national oil industry groups to develop bridging arrangements to assist the drilling industry in the implementation of safety cases.

If followed, the IADC guidelines provide a safety case acceptable to regulators and will reduce proliferation of differing approaches by new safety case adoptees, Mr Spackman said. In late 2010, the guidelines were updated to identify shortcomings related to bridging arrangements, particular risks of deepwater wells, and evaluation of routes to temporary safe refuges and evacuation systems. The guidelines remain under continual review to address other gaps as they may be identified.

With bridging arrangements, Mr Spackman said they are either required or expected in areas where a safety case is required by regulation, but only high-level guidance (UK Step Change and OGP) is currently available internationally. IADC believes that the uncertainties regarding individual and mutual roles and responsibilities for the security, safety and protection of the environment must be clarified for each enterprise.

IADC continues to support national and regional initiatives to develop guidance on bridging arrangements, such as the API-IADC Well Construction Interface Document (WCID).

G20 GMEP

IADC was among international organizations invited by President Obama’s National Security Council to participate in two G20 Global Marine Environmental Protection (GMEP) group meetings over the past year. The first was held in Moscow in February, and the second was held in Paris in July. Mr Kropla represented IADC at both meetings.

The G20 consists of finance ministers and central bank governors from 19 countries, plus the European Union, representing the world’s largest economies. The GMEP workgroup was established as an initiative on offshore oil and gas exploration and development and marine protection as the result of a proposal made by Russia after Montara and Macondo.

Besides IADC, other international organizations that participated in the meetings were the International Maritime Organization, the Organization for Economic Cooperation and Development, the International Energy Agency, the Organization of Petroleum Exporting Countries, the North Sea Offshore Authorities Forum, the International Energy Forum and OGP.

At the February meeting, the organizations made presentations on current activities and initiatives that might contribute to the workgroup’s mandate to exchange information about best practices for preventing and responding to incidents related to offshore oil and gas exploration and development, as well as maritime transportation.

Mr Kropla’s presentation focused on continued refinement and growing acceptance of the IADC HSE Case Guidelines; IADC’s work in establishing industry training standards through its accreditation programs such as WellCAP, Rig Pass and Ballast Control & Stability; and the association’s involvement with international initiatives such as the JITF and OGP’s GIRG initiative.

The meeting agenda included presentations on BP’s Macondo Accident Investigation report, the US Presidential Commission’s report on the BP spill, and the Australia Commission of Inquiry’s report on the Montara spill.

The GMEP also continued development of a questionnaire on methods of sharing best practices with its members and select international organizations and international experts. Responses to the questionnaire, along with a review of international marine environmental regulation of offshore oil and gas exploration, production and transportation, are being considered to make final recommendations.

This work was continued at the July meeting, where a “business practices seminar” was held to allow for more direct input from industry. BP, China Offshore Environmental Services (part of China National Offshore Oil Corp), Shell, Petrobras, Statoil, ENI, Total and Saudi Aramco each made presentations detailing the environmental protection efforts undertaken in their operations. Abu Dhabi National Oil Company, ConocoPhillips, ONGC, PEMEX and Repsol also attended.

Mr Kropla spoke about IADC’s conferences worldwide, particularly those related to HSE, well control and the environment. He also discussed plans to revise the HSE Case Guidelines, the WCID and the WellCAP curriculum.

The second day’s members-only meeting aimed to refine the latest draft of the issue paper on sharing best practices for marine environmental protection. IADC submitted technical comments concerning an overstatement of the water-depth capability of jackups and clarifying WellCAP as an accreditation system rather than a “well control school.” The comments were accepted.

He also offered these recommendations:

• Support the use of industry-developed standards, particularly API and ISO Technical Committee 67;

•Establish a website to act as a clearinghouse for resources for sharing best practices for training materials, technical reports, conferences, etc; and

• Acknowledge and support the work of industry organizations engaged in the dissemination of best practices.

The GMEP was encouraged to make the website available to non-G20 members as the goal should be to provide a route to information people might not encounter otherwise.

ISO

In early 2011, the Management Committee of the International Organization for Standardization’s (ISO) Technical Committee 67 agreed to a detailed and prioritized action plan on standards that should be revised or developed in view of learnings derived from the Macondo and Montara incidents.

The plan requires considerable effort and resources. Some of the work can be viewed as typical of the ongoing work of the committee, while other work addresses new subjects, e.g., a “wells integrity – umbrella document,” guidance on “development and implementation of HSE management systems” and “competence of personnel.”

High-priority work includes revision or development of standards for:

• Reliability modeling and calculation of safety systems;

• Testing of well cements;

• Isolating potential flow zones during well construction (based on API Std 65-2);

• Drill-through equipment (based on revised API Spec 16A and ISO 13533);

• BOP equipment systems for drilling wells (based on the new API Std 53);

• Deepwater well design considerations (based on API RP 96); and

• Remotely operated tools and interfaces on subsea production systems (based on revised API Spec 17H).

Lower-priority items affecting MODUs include:

• Expansion of the scope of ISO 13702 to address blowout scenarios on MODUs;

• Revision of ISO 15544 on requirements and guidelines for emergency response, and

• Revision of the ISO 19901-7 (stationkeeping systems) to “ensure the standard adequately covers the stability of drilling vessels and that the vessel’s movement (intact or in damage condition) for ultimate capsize could not harm the drilling riser (sic).”

IRF

IADC continues to liaise with the International Regulators Forum (IRF), presenting updates at their regulatory meetings on industry activities since Macondo. Mr Kropla participated in two presentations at IRF’s Summit Workshop in Stavanger, Norway. The first focused on IADC’s global perspective, and the second was given jointly with OGP.

The IADC presentation was given in response to questions posed by IRF regarding IADC’s past and planned activities, critical issues facing the industry and expectations of the international regulators.

The joint presentation with OGP included Mr Kropla and Mr Cromar of ConocoPhillips, appearing in his capacity as chairman of OGP’s Wells Expert Committee. The session, “Well Control and BOP Issues,” was introduced by Magne Ognedal of PSA Norway. The presentation was offered in response to a request made by IRF to both OGP and IADC urging an evaluation of the functionality, reliability and vulnerability of BOP systems. This issue was one of the strategic items on which various regulators agreed to at last year’s IRF meeting in Vancouver.

When introducing Mr Kropla and Mr Cromar, Mr Ognedal expressed great expectations of the work launched by the industry to overcome the challenges presented by BOPs and well control.

“The natural course for us was to approach the industry,” Mr Ognedal said. “So we contacted the IADC and the OGP with a number of questions about existing systems and equipment. Today’s review of recommendations from the industry shows that much good work is being done. We now face the long and demanding route from studies and recommendations to actual implementation.”

Earlier, Mr Kropla participated in the IRF’s first extraordinary meeting in the group’s 17-year history in late 2010. Representatives of regulatory agencies from Australia, Brazil, Canada, the Netherlands, New Zealand, Norway and the United Kingdom attended.

The industry panel highlighted activities of IADC, API, OOC and OGP. IADC’s presentation focused on its involvement with the JITF, primarily on the Equipment and Procedures workgroups, on proposed implementation of a safety case system in accordance with the IADC HSE Guidelines, and the WCID.

NAE testimony

IADC, along with a number of producer and service companies, appeared at a hearing in March 2011 of the US National Academy of Engineering’s (NAE) Subgroup on Regulatory Oversight. The hearing was held as part of NAE’s inquiry into Macondo, which was requested by the US Department of the Interior.

The hearing in Houston focused on the potential value of introducing a safety case system in the US. Representing IADC at the meeting, Mr Kropla appeared on a panel discussion that included Charlie Williams, Shell; Bill Arnold, ConocoPhillips; William Daugherty, ATP Oil & Gas; and Richard Williams and Aaron Swanson, Baker Hughes. Testimony later in the day included Cory Loegering, Apache; Michael Denkl, Schlumberger; and Jeremy Thigpen, National Oilwell Varco.

Panel participants were asked to respond to questions posed by the NAE committee. These included views on the potential benefits of a safety case, modifications that might be considered for safety case implementation in the US, and potential barriers to implementing a safety case system in the US.

Other questions focused on views toward establishing an industry-operated safety institute and how it might function, as well as whether operating companies should be required to participate in well control containment groups and provide real-time monitoring of operations.

Congressional testimony

In March 2011, Jim Noe of Hercules Offshore testified in Washington, DC, before the Energy & Power Subcommittee of the House’s Energy & Commerce Committee. His message was clear: The Obama Administration is working to dismantle an entire industry, and we can’t let them succeed.

“The Administration has knowingly and irresponsibly put policies in place that have undermined thousands of good-paying jobs in the offshore oil and gas industry … and repeatedly ignored federal court orders that struck down the administration’s job-killing policies and attempts to create new law by executive fiat,” the testimony stated.

It is imperative that domestic oil and gas production in the Gulf of Mexico be resumed immediately, Mr Noe said, adding that a de facto moratorium had already forced Seahawk Drilling into bankruptcy, “destroyed by the misguided and heartless policies of this Administration.”

Moreover, the cancellation of offshore lease sales made the domestic production situation even worse. Businesses are being forced to look for work outside the US, leading both drilling rigs and highly trained personnel to depart.

“Offshore exploration provides affordable energy for all Americans and supports jobs in every corner of America. We must not let this industry die,” Mr Noe said.

CSB testimony

Mr Spackman testified in December 2010 in Washington, DC, before the US Chemical Safety Board (CSB) as part of its investigation into Macondo’s causes. He reviewed IADC’s HSE Case Guidelines for MODUs and described why a safety case based on these guidelines is appropriate for US deepwater drilling operations. He also pointed out that the guidelines facilitate acceptance across regulatory jurisdictions where a safety case is required; they also reduce proliferation of differing requirements by new safety case adoptees.

Additionally, he described the API-IADC WCID and how it adds the elements of well basis of design, well execution plan and critical well activity risk assessments to the traditional HSE management system bridging arrangement. Further, IADC was developing recommendations for changes to the guidelines based on results of gap analyses with API RP 75 and BSEE’s SEMS Final Rule.

Mr Spackman also urged the agency to assess its resources in developing an approach to implementing the HSE case. A means for ongoing dialogue with industry is needed, and a multi-year roadmap recognizing the complexity of that implementation should be formed.

He added that the US Coast Guard, which also holds regulatory jurisdiction over offshore E&P activity, should establish dialogue with BOEMRE, particularly on matters traditionally under Coast Guard jurisdiction.

IADC MODU HSE Case

In October 2010, the IADC HSE Case Users Group adopted several minor amendments to the IADC HSE Case Guidelines for MODUs in immediate response to information gaps identified from the Macondo incident. These amendments provide clarifications and point to additional areas of emphasis, particularly with regard to bridging arrangements. They have been incorporated into the guidelines and are available on the IADC website.

In October 2011, the Users Group adopted additional amendments to the guidelines to address gaps identified through a gap analysis against the provisions of API RP 75 and BSEE’s SEMS rule. These addressed: temporary refuge and escape routes, drawings and schematics, design and commissioning of new facilities, management of change, job safety analyses and record retention. The text of the amendments is available on the IADC website and will be incorporated into the guidelines in the near future.

Job creation

In light of President Obama’s address to Congress and the US in September 2011 on jobs creation and reducing unemployment, IADC joined more than a dozen other industry groups to urge the president “to improve efficiency and the rate of permitting activity in the Gulf of Mexico to a rate that is commensurate with industry’s ability to invest.”

The groups noted that increasing the permitting rate would simultaneously create high-paying jobs and increase revenues into federal coffers. A recent study showed that increased E&P in the Gulf would create 230,000 jobs and increase US GDP by more than $44 billion.

The return to normal following the drilling moratorium has been characterized by a lack of urgency. Meanwhile, the Gulf is losing business to foreign markets. “The rate of approval of exploration plans is down 85%, and the median approval time has slipped from 36 days to 131 days,” the industry groups said. “Rigs are actually leaving the Gulf for greater business certainty in places like Egypt, Congo and Nigeria,” the letter stated.

Legal action

IADC continued to monitor the flood of anti-drilling lawsuits filed by environmental organizations since Macondo.

In late 2010, IADC, API, IPAA and the US Oil & Gas Association (USOGA) filed a motion to intervene in a lawsuit brought by the Center for Biological Diversity (CBD) challenging Secretary Salazar’s decision to lift the drilling moratorium. CBD claimed that the Secretary should have prepared an environmental impact assessment (EIA) prior to making that decision and that the court should order the moratorium to stay in place until an EIA has been completed.

The associations’ motion to intervene emphasized that, as it normally takes at least 12 months to prepare an environmental impact statement, what the CBD seeks would effectively mean a complete cessation of deepwater oil and gas drilling in the Gulf of Mexico for months.

Ensco lawsuit

IADC closely monitored and supported the lawsuit filed by Ensco against the US government that ended in a resounding win for the industry. In February 2011, Ensco won a motion for a preliminary injunction against BOEMRE, which was ordered to take action on five of Ensco’s pending drilling permit applications within 30 days and to report its compliance to the court. In granting the motion, US District Court Judge Martin Feldman noted that Ensco showed:

• A substantial likelihood of prevailing on the merits;

• A substantial threat of irreparable injury if the injunction is not granted;

• The threatened injury outweighs any harm that will result to the non-movant if the injunction is granted; and

• The injunction will not disserve the public interest.

The judge noted that, under the Outer Continental Shelf Lands Act, the government is under a duty to act by either granting or denying a permit application within a reasonable time. “Not acting at all is not a lawful option,” the ruling stated.

The court also agreed that 30 days is “a common-sense marker” of the speed at which applications should be approved or denied – the same as the 30-day period Congress mandated in which BOEMRE must act on exploration plans. Before Macondo, permits were processed in about two weeks. Yet five permits relating to Ensco’s deepwater rigs had been pending from four to nine months – a time frame the judge called “unreasonable, unacceptable and unjustified.”

“Beginning to process permit applications will restore normalcy to the Gulf region and repair the public’s faith in the administrative process,” the judge wrote.

Prior to Ensco’s lawsuit, IADC filed an amicus brief in mid-2010 in support of Hornbeck Offshore Services’ lawsuit against Secretary Salazar; the case won a ruling from Judge Feldman lifting the original moratorium.

“The question is not whether the drilling moratorium will have a severe effect on the economy of the Gulf Coast. No one doubts that. The question is more basic: whether the local economy can even survive the moratorium,” the brief stated.

It also cited news reports and comments from public figures and citizen groups warning of dire economic consequences.

European Commission

IADC closely monitored the drafting of a Macondo report that was presented to the European Parliament in 2011. The report was drafted under the leadership of UK chair Vicky Ford and advised by OGP, with input from other members of the European Parliament and industry representatives. It has been accepted by the Parliament and referred to the European Commission, which plans to propose related legislation.

In presenting the report, Ms Ford emphasized that issuing E&P licenses is the prerogative of EU member states, and Europe should favor a site-specific, goal-setting approach to managing offshore safety. She also stressed that some 90% of oil and 60% of gas is produced offshore and that oil and gas are crucial to Europe’s energy security. Any approach to offshore safety also must involve neighboring countries because there is much E&P in non-EU countries as well, she said.

The need for a true safety culture was emphasized, as was the value of a more qualified inspection network. However, it is not clear that the EU’s control would lead to real added value, Ms Ford said, and it should not draw extensively on scarce national resources.

Further, substantial investments have already been made in capping and containment equipment. The European Maritime Safety Agency has no expertise in spill prevention and should not regulate offshore installations.

Although the report recognized that operators should be financially liable for spills, it also noted that the obligation could be met in different ways; regional mutual funds may be a model. Moreover, care must be taken so that smaller operators are not excluded from the market.

Ms Ford also concluded that an E&P moratorium in the Arctic is not appropriate as Arctic exploration began in the 1920s. Regulators should provide permits only when they are confident that the risks are being addressed.

EU Commissioner Antonio Tajani responded that any EU action will seek to avoid destabilizing the current regime and will be based on existing best practices.

UK Parliament

In early 2011, the UK Parliament concluded that there should not be a moratorium on deepwater drilling on the UK Continental Shelf (UKCS) but recommended that the UK Health and Safety Executive (HSE) prescribe that there be two blind shear rams on all BOPs on the UKCS because the equipment provides a final line of defense against spills. The recommendations were part of a UK parliamentary report in January 2011.

Another finding of the report was that the Offshore Pollution Liability Association (OPOL) limit of $250 million is insufficient. If there is an oil spill resulting from drilling activities, liability legislation must ensure that those affected are compensated, the report said.

However, the UK Parliament also agreed that oil spill response procedures in the UK are robust and recognized that a drilling moratorium would increase the UK’s reliance on imports of oil and gas, potentially decreasing the national security of supply. Calls for increased oversight of the UK offshore industry by the European Commission should be rejected in favor of multilateral approaches to regulation and spill response, the report concluded.

NSOAF

In September 2010, IADC hosted a group of regulators from the North Sea Offshore Authorities Forum (NSOAF) in Amsterdam to discuss industry and IADC efforts following Macondo and Montara.

Mr Kropla provided the briefing with assistance from Mr Spackman, following an introduction by IADC president Dr Hunt. The presentation focused on key IADC activities, including participation in the JITF and other industry initiatives.

Regulators in attendance hailed from Norway, the Netherlands, the Faroe Islands, Germany and the United Kingdom.

In March 2011, IADC again met with NSOAF regulators for a briefing and dinner in Amsterdam. Mr Kropla provided an update addressing industry efforts since the previous meeting.

Additionally, regulators from Denmark, the Netherlands, Norway and the UK provided perspectives on recent developments and challenged drilling contractors to improve their safety and equipment. This resulted in a candid discussion in which contractors detailed the robustness and comprehensiveness of their safety management systems.

Cuba: One Gulf

In September 2011, IADC and the Environmental Defense Fund (EDF) Cuba Program jointly hosted a delegation to Havana, Cuba, to meet with Cuban government and oil industry officials. Accompanying IADC and EDF was William Reilly, co-chairman of the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling.

The purpose of the visit was to continue a dialogue between US experts and their Cuban counterparts in evolving regulations and best practices that will promote safe deepwater drilling in the entire Gulf of Mexico, not just the US and Mexico but Cuba as well.

Dr Hunt and Mr Petty represented IADC on the delegation. Dan Whittle of the EDF and Richard Sears, who served as chief scientist for the Deepwater Horizon Commission, also participated.

The IADC/EDF delegation met with the Minister of Basic Industries, Tomas Benitez, and with the managing director of the Cuban national oil company CUPET, as well as the director of the ministry responsible for regulating the oil and gas sector and other senior officials in the oil and gas industry.

An overview of Cuban exploration plans was presented, followed by information on Cuba’s permitting procedures and regulatory requirements. A trip to a Great Wall Drilling rig was included. The rig had just completed Cuba’s longest horizontal reach well from a land location to a subsea reservoir.

Further, CUPET officials, along with representatives of international oil operators with drilling concessions in Cuba, attended a half-day conference with Mr Reilly, who summarized lessons from Macondo. Mr Reilly expressed his view that Cuba’s oil industry had diligently prepared a thorough plan for permitting and regulation of deepwater drilling. He later communicated this opinion to the press and to US government officials upon his return from Havana.

Mr Reilly also publicly recommended that CUPET be permitted by US authorities to become a producer/operator member of IADC in order to further advance their knowledge and capabilities in deepwater operations and safety.

According to Dr Hunt, IADC’s “One Gulf” initiative is being undertaken by the private sector because the 50-year-old break in diplomatic relations between the US and Cuba and the US economic embargo against Cuba inhibits, if not prevents, government experts from participating in the effort to protect US and Cuban common safety and environmental interests.

Various international press accounts of the delegation’s visit to Cuba can be read on the IADC website.

Mexico’s CNH

Representatives of BOEMRE and Mexico’s Comisión Nacional de Hidrocarburos (CNH) met in New Orleans in July 2011 to exchange information regarding each agency’s regulatory practices and procedures. IADC, Noble Drilling Services and Shell were invited to make presentations regarding the use of safety cases to promote operational safety.

Mr Spackman presented the conceptual model for the HSE Case and explained how it is used by other offshore petroleum regulators. Peter Bridle of Noble Drilling Services explained how Noble implements the safety case, particularly with respect to hazards analyses, assignments of responsibilities, work process design, etc. Joseph Murphy, Shell, explained how Shell implements their HSE management system with respect to hazards analyses, assignments of responsibilities, work process design, etc, via formal interfacing/bridging arrangements.

Other topics addressed at the event included inspections; compliance and enforcement of safety and environmental and safety regulations; incident management; and safety and environmental management systems.

COS

Following publication of the report of the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling, API established the Center for Offshore Safety (COS) with the goal of creating a central arena for all deepwater offshore stakeholders to pursue excellence in offshore safety. Still in its formative stages (Shell’s Charlie Williams, chairman of the COS Governing Board will speak at the 2011 IADC Annual General Meeting), the COS Governing Board hosts several drilling contractors and IADC as members.

Representing drilling contractors are Mo Plaisance, Diamond Offshore Drilling; Alan Quintero, Transocean; Peter Bridle, Noble Drilling; Mark Burns, Ensco; and Dr Hunt, IADC.

The first project of the COS is the creation of an auditing checklist and accreditation of third-party independent inspectors. COS also is incorporating the SEMS Toolkit developed by the OOC with the assistance of IADC.

Arctic Council Task Force

Mr Petty represented IADC on the US delegation to the first meeting of the Arctic Council Task Force for Arctic Marine Oil Pollution Preparedness and Response, held 17-18 October 2011 in Oslo, Norway. The task force was commissioned to promote awareness of and cooperation in sharing information, response equipment and personnel across the Arctic in response to a major spill event. IADC’s attendance as a private-sector participant was requested by the US Coast Guard to provide industry perspectives on suitability of equipment, equipment stockpiles and logistical considerations in identifying, mobilizing, deploying and demobilizing equipment.

In her invitation to IADC, Coast Guard Rear Admiral Cari Thomas, who headed the US delegation, noted that IADC’s insights and knowledge specific to the drilling industry would enhance discussions at the meeting.

Shell, representing IPIECA, was the only other industry participant invited.

Beside the Coast Guard, the other federal agencies represented in the delegation were the US BSEE and the National Oceanic Atmospheric Administration. Government representatives from all Nordic countries, as well as Canada, US and Russia, also made presentations.